Happy National 401(k) Day: Celebrate with Tips from a Financial Advisor

We all envision a relaxing and fulfilling retirement, but achieving that dream requires preparation. National 401(k) Day happens every year on the Friday after Labor Day. It reminds you to check your retirement savings.

With only 70% of Americans adequately prepared for retirement, it’s crucial to understand how to turn that retirement dream into reality. Although 79% of Americans are employed by companies offering 401(k) plans, only 41% utilize this benefit. Don’t miss the opportunity to explore the advantages of saving for retirement through your company’s 401(k) plan, or to discover alternative strategies if you don’t have access to one.

The Origin of National 401(k) Day

National 401(k) Day started in 1996. It was created by the Profit Sharing/401(k) Council of America. This group is now called the Plan Sponsor Council of America. Celebrated on the Friday following Labor Day, this day was chosen to allow employees to "start the week with Labor Day and end the week with Retirement."

This observance aims to teach people about saving for retirement. It encourages companies to provide clear and interesting information about 401(k) plans. Given that retirement planning can be intricate and rules can change rapidly, it’s crucial to have a dedicated day to enhance understanding—especially since fewer than 40% of Americans can answer basic questions about their 401(k).

Many companies now promote year-round education on saving for retirement due to the growing importance of financial health. Today, retirement planning extends beyond just 401(k) plans due to varying access and preferences for investment diversification.

If your employer offers a 401(k) plan, it’s a valuable tool to kickstart your retirement savings. For those who are self-employed, setting up a 401(k) through a financial institution is an option. There are two main types: traditional 401(k) plans, where contributions are deducted from your paycheck before taxes, and Roth 401(k) plans, where contributions are made with after-tax dollars, allowing your money to grow tax-free.

5 Strategies for Optimizing Your 401(k)

1.     Start Contributing Early: While it's never too late to begin saving for retirement, the earlier you start, the more you can maximize your savings. If you're in your 20s—or know someone who is—begin contributing to a 401(k) or IRA as soon as possible.

2.     Utilize Employer Matching Contributions: Many employers offer to match a portion of your contributions. For instance, they might match 50% of your contributions up to 6%. This means if you contribute 6% of your salary, your employer will add an additional 3%.

3.     Choose Investments that Suit You: Most 401(k) plans provide a range of investment options. Select those that align with your personal investment goals and risk tolerance to ensure your portfolio meets your needs.

4.     Avoid Early Withdrawals: Taking money out of your 401(k) before retirement can result in penalties and tax liabilities, which you likely aimed to avoid by saving in the first place.

5.     Monitor Your Account Regularly: It’s easy to overlook long-term investments, but regular check-ins are crucial. Periodically review and adjust your account to stay on track with your retirement goals.

Bottom Line

National 401(k) Day is a crucial reminder to focus on securing your financial future through effective retirement planning. Today, let's think about where this day comes from. We should also consider its goal.

This goal is to make learning about retirement savings easy and interesting for everyone. Don’t wait—begin building your retirement savings now and look forward to a future of well-earned relaxation and financial stability. Happy National 401(k) Day!

Sources:

https://nationaltoday.com/national-401k-day/

Disclosures:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information